The Slaughter and May insider said: “The firm is considering all things, including possibly hiring US-qualified lawyers in Hong Kong and elsewhere. But no decision is made yet and we are still in the process of reviewing our strategy.”

Another source added: “The strategic review is triggered by the significant changes in the market. In the past year, a number of US firms have moved on to take on Hong Kong law capabilities. They are looking at what they should be doing to provide better services to our clients in the changed environment.”

Davis Polk & Wardwell is not alone in launching a local law practice in Hong Kong. Several US firms including Cleary Gottlieb Steen & Hamilton, Simpson Thacher & Bartlett and Sullivan & Cromwell have all launched local law practices over the past year, after capturing senior-ranking partners from UK rivals (5 September 2011).

The Slaughter and May source said: “We keep the firm’s strategy under rolling review and the question of US law capacity is just one of many market, legal and international opportunities and challenges which we consider from time to time.”

In light of Freshfields’ recent relaunch in Singapore (12 September 2012), Slaughter and May is also understood to be reviewing its strategy of whether or not to return to the increasingly important South East Asia hub.

“The firm has experienced a high level of business activity in Singapore and the South East Asia region. It’s also becoming an important place for arbitration work. In addition, a growing number of multinational companies and regional financial services institutions are being services out of Singapore. We are open to the possibility of returning to Singapore, but it’s not going to happen in the short-term,” the source said.

“But the firm is committed to remain independent, and we will strive to strengthen our international network model and ensure it’s well understood among our relationship firms and clients around the world.”

Slaughter and May launching US law practice, requiring it to make lateral hires. Double wow. I’m sure the firm will have no trouble making really good quality laterals but you can’t help thinking that it’s held off on going down this route a little too long. Its ‘it’s our strategy and we’re sticking to it come what may’ mantra looks just a little bit hubristic now.

What bubble? Hong Kong has always been a very volatile market. Any one who’s been there long enough will know the market has had many ups and downs, and it always bounce back, although sometimes it may take longer than other times. However, it’s true that the salary levels of some US partners are certainly artificially inflated and will probably come down… Firms with the right strategy, patience and right staffing structure will be fine.